Lenders set their own guidelines for loans based on their tolerance for risk. It’s the role of underwriting to make sure that a borrower meets a lender's guidelines. This includes ensuring qualification from a credit perspective. Let’s get into what that looks like at Rocket Mortgage. In the next couple of sections, we’ll also introduce a couple of terms you may not be familiar with.
VA Approve/Eligible Purchase Or Refinance
Most loans sent to the VA go through an automated government underwriting system. If you get approved by the algorithm without a human being involved, it’s termed “approve/eligible.” Rocket Mortgage requires clients to have at least a 580 median FICO® Score.
If you qualify with a score between 580 and 619, you’ll have some strict requirements in terms of how high your house payment and overall debt load can be.
The first thing we look at is your housing expense ratio, which is your mortgage payment – including taxes, insurance and (if applicable) homeowners association dues – divided by your gross monthly income expressed as a percentage.
Mortgage Payment ∕ Gross Monthly Income = Housing Expense Ratio
In no event can you spend more than 38% of your income before taxes on a house payment if you’re qualifying with a credit score below 620.
In addition, we also look at your debt-to-income ratio (DTI). This is a ratio comparing your monthly payments for installment debt and minimum payments on revolving debt like credit cards to your gross monthly income.
If your credit score is below 640 with the down payment being less than 5%, we require an overall DTI, including your mortgage payment and all other debts, to be no higher than 45%.
If your score is 620 or higher, we look solely at DTI. Your higher credit score may also give you access to more houses. Often, there is no specific qualifying DTI at credit scores above this level. Instead, the DTI you must meet is based on factors including both your credit score and down payment or existing equity.
VA Refer/Eligible Purchase Or Refinance
If for some reason the VA’s algorithm doesn’t approve you, you may still be able to get a loan under the “refer/eligible” route. These loans undergo the human scrutiny of manual underwriting. An underwriter will go through your documentation and see if you qualify.
Borrowers that don’t qualify for automated approval are usually those with certain negative items in their credit history. This could include late mortgage payments, past bankruptcies or foreclosure.
To qualify based on manual underwriting at Rocket Mortgage, you need a minimum median FICO® Score of 640 or higher. Your DTI can also be no higher than 45%. If you are refinancing, you have to leave at least 10% equity in the home.
VA Jumbo Loans
While the VA doesn’t set specific loan limits, lenders often have a certain point at which they consider the loan a higher risk. Most of the time, they set the limits for regular VA loans at whatever the conventional loan limit is in the area. If it’s outside a high-cost area, the current conventional loan limit is $726,200. Anything above that is a VA jumbo loan.
With full VA entitlement, if you have a qualifying credit score of 640 or higher, you can purchase with no down payment or refinance up to the full amount of your equity for loan amounts of $1.5 million or less. You can get a loan of up to $2 million with a 10% down payment or equity amount and a 680 median credit score.
The U.S. Department of Veterans Affairs doesn't set a specific VA loan credit score requirement. Lenders, however, can set their own minimum requirements for a VA loan. Most require a score of at least 620, but some go as low as 500.
VA lenders typically require a FICO score of at least 620. High loan amounts, such as those exceeding $1 million, may require a higher credit score. Some lenders may approve lower scores, but it's common for these borrowers to face additional financial scrutiny and requirements.
Meet your lender's minimum credit score requirement, generally 620. Meet your lender's debt-to-income (DTI) ratio requirement, generally no more than 41 percent. Demonstrate proof of income. Pay the VA cash-out refinance funding fee.
The Bottom Line: Lenders Set Their Own Credit Score Requirements For VA Loans. The VA doesn't have a minimum credit score requirement. Instead, lenders can set their own requirements. At Rocket Mortgage, the minimum qualifying credit score is 580.
VA loan denial isn't uncommon, but your odds are generally better with a VA loan. According to HMDA data, 12.93% of VA loan applications received a denial in 2022, compared to 17.29% of FHA loans and 17.9% of conventional loans. While not uncommon, many scenarios may be preventable.
If having a low credit score is a concern, a VA home loan could still make home ownership possible. VA does not have a minimum credit score; if one is imposed, it is by the private lender and you can always shop a different lender.
The VA does not set a minimum credit score requirement for VA loan eligibility, but lenders typically do. Because of this, VA loan credit score requirements vary by lender, with most lenders typically requiring a 620 FICO credit score to obtain financing.
No.The VA does not set a minimum credit score for the VA loans it guarantees. Instead, it asks lenders to look at the full loan profile of the person applying for a VA loan.
The standard VA loan limit in 2024 is $766,550 for most U.S. counties, increasing from $726,200 in 2023. VA loan limits also increased for high-cost counties, topping out at $1,149,825 for a single-family home. VA loan limits do not represent a cap or max loan amount.
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
What credit score do you need for a USAA mortgage? A minimum 620 credit score is necessary for conventional and VA home loans. Other factors also apply including your DTI ratio, current income, employment history and down payment requirements.
Veterans First currently requires a FICO score “around 600” for a VA loan. Does Veterans First do VA cash-out refinancing? Yes, you can apply for VA cash-out refinancing with Veterans First Mortgage.
Do VA Loans Require A Down Payment? VA loans are attractive because they usually don't require any down payment. This is an important benefit for home buyers who are short on cash. A down payment of 10% on a home costing $240,000 comes out to $24,000.
One of the variables that VA lenders review is the credit report. What's in your credit report and how do you read it? There are three main credit repositories, Equifax, Experian and Transunion that serve as a database for consumer borrowing activity.
Introduction: My name is Clemencia Bogisich Ret, I am a super, outstanding, graceful, friendly, vast, comfortable, agreeable person who loves writing and wants to share my knowledge and understanding with you.
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